*NEWS*ISRAEL:LATEST ON HP’s GREY MARKET
*NEWS*ISRAEL:LATEST ON HP’s GREY MARKET
2006-04-07 at 1:59:00 pm #15182
HP criticized Rosenfeld’s administrative performance
criticizes HP Israel managing director Gil Rosenfeld’s motives for
seeking disclosure of the investigative report, claiming this will harm
the company and its employees.
06 In the latest developments in the Hewlett-Packard (Israel) grey
market affair, Hewlett-Packard last night submitted its response to
the Tel Aviv Labor Court to HP Israel managing director Gil Rosenfeld’s
request for disclosure of Hewlett-Packard’s report that is the basis
for his firing. In its response, Hewlett-Packard criticizes Rosenfeld’s
motives, and claims that meeting his request will harm the company and
Hewlett-Packard states that Rosenfeld is not being
accused of personal involvement in grey market sales, but that he bears
personal responsibility as general manager of HP Israel.
Hewlett-Packard nonetheless hints that its report criticizes
Rosenfeld’s administrative performance, and the attitude towards
Hewlett-Packard’s investigative team. The report states, “The
investigative report does not only deal with ‘grey market’ matters, as
depicted by Mr. Rosenfeld. It also deals with the administrative
practices at HP Israel, the attitudes of the managerial echelon
subordinate to him, and the obstacles put in the way of the activities
of the investigative team that prepared the report.”
As for the
Rosenfeld’s request for disclosure, Hewlett-Packard writes,
“Publication of the report will harm third parties, whose response to
the request was not sought, and for which consent was not given in any
Hewlett-Packard attacks Rosenfeld, saying, “Mr. Rosenfeld is
so busy defending his reputation, that the reputation of others (those
he supervised) and the company’s commercial secrets have little value
as far as he is concerned.”
Hewlett-Packard also claims that
disclosure of the report will harm its commercial secrets and business.
“Reading the report reveals that it is full of commercial secrets. A
second thread throughout the report mentions the company’s operating
methods, including marketing, auditing and administrative methods, and
so forth. These operational methods are known to the public at large,
and the company makes intense efforts to conceal them from its
HP’s bad dream
What’s behind the firings at HP Israel?
after Hewlett-Packard (Israel) managing director Gil Rosenfeld got an
e-mail from Hewlett-Packard that he was about to be fired, he called
his attorney, Adv. Tamar Golan, who is his mother-in-law. Golan, who is
thought to know every loophole in Israel’s labor laws, needed little
effort to find one. Hewlett-Packard, she said, did not give Rosenfeld
any real chance to defend himself. Furthermore, his immediate severance
from the company’s resources, such as his e-mailbox, was carried out
even before the firing process was completed, violating the legal
lay-off procedure.Golan had no doubt how to proceed against the men who
came to carry out the computer giant’s verdict. The hearing for
Rosenfeld was a macabre formality, with a ravenous media waiting
outside, and gimlet-eyed combative lawyers inside.
In retrospect, HP
Europe’s emissaries didn’t have a chance. Golan ran a double strategy:
she accused Hewlett-Packard of unfair and unreasonable firings on one
hand, and of waging a crusade against HP Israel executives on the
other. Things went so far, that HP VP and managing director
Central-Eastern Europe, Middle East & Africa Jan Zadak began to
stutter when Golan hurled accusations at him, and threatened him with a
private lawsuit for criminal libel, a rare event in the business world,
doubly so when a respected company like Hewlett-Packard is involved.
won the first round by knockout. On Monday evening, Tel Aviv Labor
Court Judge Alia Fogel issued an injunction against firing Rosenfeld,
and ordered Hewlett-Packard to and over Rosenfeld’s lawyers the full
investigation report carried out in Israel within 24 hours. The mumbled
excuses by HP Europe’s advisers that petition to the court and the
delay in carrying out the firings would hurt the company failed to
impress the judge.
What really happened at HP Israel, and why did
Hewlett-Packard react so aggressively? In recent months,
Hewlett-Packard president and CEO Mark Hurd has fought hard against
grey market sales that have hurt the company’s revenue.
associates now claim that Hewlett-Packard decided to exploit minor
infractions in order to teach a lesson to countries involved in
creating a grey market. They claim that the company’s management
decided to come down hard on HP Israel as a kind of “show and tell”.
Other sources and observers claim, however, that HP Israel had huge
sales on the grey market. Even if Rosenfeld was unaware and uninvolved
in these sales, it was irregular, to put it mildly.
and legal blitzkrieg have rendered his actions a secondary issue. The
main subject now under discussion is Rosenfeld’s reputation, and maybe,
behind the scenes, the amount of compensation he will get. In any case,
Rosenfeld, like any employee, deserves to be fired with dignity, and
not be judged in the public square.
Another aspect of this story is
the bad blood between HP Israel’s current managing director and his
predecessor, Ehud (Udi) Graff. Rosenfeld hinted that when Graf headed
HP Israel, the company was involved in large-scale grey market sales,
and that Graf tried “to frame him”. Graff has chosen to stay silent for
now, but there are allegations that the entire investigation only
covered the last two years – Rosenfeld’s tenure – so Rosenfeld’s
accusation of Graff is ridiculous.
The Rosenfeld affair, as it has
been handled until now, is a milestone in relations between Israeli
subsidiaries and their international parent companies.
Hewlett-Packard’s actions were incorrect from the outset. Its attitude
towards local labor laws, the Israeli media and customers, and HP
Israel’s employees was horrendous. The messy affair arising from
uncomplicated firings could have been avoided.
It is quite possible,
however, that the real scandal at Hewlett-Packard isn’t HP Israel, but
is far from these shores. The investigation into the grey market was
handled by agents from Hewlett-Packard’s US headquarters. Headquarters
sent emissaries from Europe to carry out the verdict in Israel, but
they have no authority to settle the matter.
apparently has a much greater problem at HP Europe, and it’s possible
that the HP Israel executives are only the first heads to roll at
Hewlett-Packard’s Europe, Middle East and Africa (EMEA) activities. It
should be borne in mind that the Israeli managers were only at the end
of the food chain. There are more senior Hewlett-Packard executives in
Europe who benefited and may have deliberately turned a blind eye.
There have been rumors in the past few days that other Hewlett-Packard
EMEA branches are involved in similar cases, such as Dubai and South
What will happen now? The Tel Aviv Labor Court has ordered
Hewlett-Packard to hand over the investigation report to Rosenfeld’s
representatives by last night, and then to give Rosenfeld three working
days to prepare his defense. The next stop will be a hearing on Monday.
the meantime, HP Europe has appointed its regional HP managing director
international sales Europe Ken Willett as operational manager at HP
Israel. Willlett is Zadak’s deputy, and he will manage operations in
Israel until Hewlett-Packard decides on its next moves.
will have to respond fast in order to calm its Israeli customers. HP
Israel’s large customers include Israel Electric Corporation (IEC) as
well as government ministries, and competition for these customers is
vicious. In the summer of 2004, when heads rolled at Cisco Systems
(Israel), its competitors cheered. A management vacuum at HP Israel
will be reflected in changeable decisions that could quickly result in
sales flight to other large comapanies.
Although most Israeli
customers don’t have direct contact with HP Israel’s senior management,
they will do the math and understand that the prices currently offered
by HP in Israel are likely to rise over time. The sales managers named
by HP’s European office won’t be open to discounting prices for Israeli
customers and — given the grey market situation — there’s a good
chance prices will go up.
On the face of it, it does not seem that
Rosenfeld will return to work at HP Israel. Although he told
journalists that he wants to wake up from a “bad dream” and go “home”,
the parties will probably now wage a war of attrition that will end in
an honorable resignation. As things appear now, Hewlett-Packard wants
the affair to end, and quickly.